The Karma hotspot: ambitious, clever, and hopefully not too naive

We all know about entrepreneurial irrationality. Every successful entrepreneur needs a little bit of it in order to do something truly innovative and take down a big incumbent.

Karma, a Techstars company that launched its Wifi hotspot product today, has some of that. The hope is that it's just the right amount of irrationality to make cheap, shareable Wifi hotspots a reality.

It won't be easy. For one, they're making hardware. Hardware startups are becoming cheaper and easier to get off the ground thanks to Arduino and resurgence of the "hardware startup" movement, but they are still more cost-intensive than, say, building a check-in app. And they scare investors, too. (For its part, Karma has rounded up $1 million in funding from Werner Vogels, DFJ, BOLDstart Ventures, Chang Ng, Collaborative Fund, David Tisch, David Cohen, Eliot Loh, Jerry Neumann, Kal Vepuri, TechStars and 500 Startups.)

But more importantly, Karma is trying to solve what must be a really difficult problem. I say "must be" because why the hell else would it be so expensive and impossible to get Wifi everywhere we want it, including on planes? Anytime you read a rant about the fact that, OMG, its 2012 and we don't have unlimited data and Wifi on flights, there are a myriad of villans to attack. But mostly it goes back to the carriers. If you (like me) are lucky enough to have been grandfathered into an unlimited data plan and enjoy tethering it (against your carrier's wishes) to your computer, don't expect that to last much longer. When I upgrade from my crappy Android, I'll be forced to change to some sort of metered or otherwise limited data plan. Most services have a similar policy in place.

Karma's philosophy is to make Wifi hotspots affordable by making them shareable. Your network, launched with a $79 hotspot that include a gigabyte of bandwidth, is named after you (Erin's Karma, for example) and open. If someone wants to join, you can give 'em 100 megabytes of data for free through your Karma dashboard. You earn free bandwidth for yourself for any amount of bandwidth you choose to give to strangers.

It's a great philosophy with just the right amount of feel-good hippie sharing for the holidays. The execution is still a bit of a work in progress. I used a Karma hotspot for a week or so, trying it out in a few coffee shops and at home. The connection was often equal to or spottier than my tethered Android phone; the 4G button had a red light on it in most areas of my apartment. For that reason, not too many hangers-on tried to join my Karma. I tested it out (and gamed the system a little?) with a second laptop at home. Out and about, it was more useful, but varied widely. I wouldn't trust it as my main source of Internet on one of my frequent 10 hour car rides through rural Pennsylvania.

Karma's provider is Clearwire. The company will have a tough time getting partnerships with any other big wireless providers because, well, it is competition with their existing, and costlier subscription-based wireless hotspot products. Making matters rather unclear is the fact that unprofitable Clearwire sold a controlling stake to Sprint in October; analysts had expected Sprint to buy the Clearwire outright.

Karma recently graduated from TechStars NYC; at demo day it announced a big partnership with American Airlines which will prove a great distribution outlet for them. My guess is they'll focus more on airline partnerships, providing Wifi where people are most hungry for it. (The company also jumped the gun on a potential partnership with Uber, which CEO Travis Kalanick called out immediately. Can anyone say Karma Police? Sorry, lame joke, I had to. )

When Karma's connection was strong, it was great and much faster than my phone. It can supposedly go up to 6 megabits per second. The battery lasts up to eight hours so I didn't have to deal with a dying phone battery, which in turn sucks energy from a dying laptop battery. You also don't have to purchase a $79 device (which comes with the first gigabyte of data free) to use Karma. You can just log onto someone else's Karma. If they won't share any bandwidth, you can purchase some (additional bandwidth is $14 a gigabyte). If you, the device owner, share enough bandwidth and earn enough Karma, you'll never have to purchase more.

If the world made sense, social bandwidth services like Karma would help us all connect to the web in a more economically viable way. The company is ambitiously hoping it does.